Mary Barra: GM's next CEO?December 17, 2012: 5:00 AM ET
FORTUNE -- On Friday afternoons, a group of top GM (GM) executives and engineers leave headquarters in downtown Detroit and heads for GM's proving grounds in Milford, Mich. for "knothole drives." Originated by Mark Reuss, head of GM's North American operations, the drives allow the executives to test new vehicles -- along with their competitors -- in successive stages of development and offer an assessment. The drives act like gates. Failure at any stage can cause a delay while refinements are made, as in the case of the 2012 Chevrolet Cruze, or outright cancellation. Plans to sell the 2010 Chevrolet Orlando in the U.S. were scrubbed after testers determined that the interior design of the manual-transmission version of the Korean-made van was unappealing.
Many Fridays, the largely male contingent includes a woman, Mary Barra, senior vice president for global product development and one of GM's highest-ranking executives. Barra, 51, is a certified glass-ceiling breaker. In Detroit's macho culture, no job more reeks of testosterone than product development -- creating and engineering new models. It requires the willingness to risk billions of dollars, the tenacity to direct thousands of engineers, and the guts to make hundreds of decisions -- some while driving at high speeds around a test track. It is the ultimate challenge for alpha-male car guys and the names of the most successful practitioners still resonate: Ford's Lew Veraldi, who championed the revolutionary 1986 Ford Taurus; Francois Castaing, the father of Chrysler's platform teams and the engineer of its 1992 cab-forward cars; and Bob Lutz, one-time Marine jet pilot and full-time über-male, who brought new life to GM design in the 2000s.
So you could feel the reverberations all the way to Eight Mile Road when GM chairman and CEO Dan Akerson announced in January, 2011 that he was replacing a much-loved engineer who had 46 years on the job with Barra, a relative unknown whose most recent job had been running, of all things, human resources. Moreover, she had spent more of her career inside an assembly plant than she had on a test track, and she would be overseeing GM's global product portfolio with limited product development experience. Instantly, Barra had been elevated to the most important job at GM ever held by a woman and became the highest- ranking member of her sex in the global auto industry.
As Akerson continues his efforts to remake GM's dysfunctional culture, Barra has become one of his principal agents. The senior vice president for global product development, she oversees a budget of $15 billion for 29,000 employees on five continents responsible for designing and developing vehicles that are sold in 130 countries. She has begun rebuilding GM's outmoded and inefficient vehicle engineering process, accelerated efforts to develop global platforms, and taken a leading role in the struggle to save Opel. In a recent move, she scrapped a system that made three different executives responsible for each model's development and devised a more streamlined structure that puts a single chief executive in charge -- a move that resulted in the elimination of 20 senior positions. Still to come: a rumored reorganization that loosens the power of GM's long-standing regional fiefdoms and puts more power in the hands of global leaders like Barra. Most important, she has strengthened her ties to Akerson, who praises Barra to Fortune as "a strong leader and change agent who knows the business inside and out -- from the plant floor and the design studio to the boardroom." He has put her on his shortlist of internal candidates to succeed him as CEO.
Barra faces a pair of crucial tests in the next 12 months. First, she is overseeing the launch of new versions of the full-size pickup trucks and sport utility vehicles that produce the vast bulk of GM's profits. Then she is leading the introduction of a new generation of small cars headed by the Chevrolet Cruze. Due in the fall of 2014, the compact Cruze will mark the debut of a global platform that will underpin 2.5 million sedans and crossovers annually, according to Reuters, including Chevrolet's Volt and Equinox and the Opel Astra. Now that 70% of GM's sales come from outside the U.S., its success is critical to GM's ability to remain competitive -- and to Barra's chances at another promotion.
After 32 years at the automaker, Barra has the resume of a GM lifer -- but absent the usual baggage. Impatience, not ambition, is her dominant trait. Her meetings are models of efficiency: She gathers the relevant parties, identifies issues, invites discussion, makes a decision, and moves on. Uncomfortable in GM's traditional hierarchy, she tells subordinates "My rules are your rules," and insists on managing by persuasion rather than fiat. "The day they say 'I'm doing it because Mary told me to do it,' is the day I lose," she told me. Her ability to cut through GM's organizational fog is memorable. As head of HR, she reduced company rules for on-the-job apparel to two words: "Dress appropriately." Barra dresses up her own corporate-issue pantsuits with black nail polish, rainbow-framed reading glasses, and four-inch heels. With Scandinavian good looks (both her parents are Finnish) and disarmingly doe-eyed, she is subject to fits of candor that would have derailed her career at the old GM. Asked at an employee meeting about prospects for the much-ballyhooed 2013 Cadillac ATS, she deftly dampened expectations when she replied, "Let's be honest: Cadillac may not be at the top of the shopping list of someone wanting to buy a BMW."
As head of product development, Barra is trying to fix a process that has bedeviled GM since the beginning of the front-wheel-drive era 30 years ago: designing and engineering appealing new models on time and on budget. GM is way behind competitors. While Volkswagen skillfully reuses components in different brands, and Ford (F) sells single designs in multiple markets, only 61% of GM's global production is made on common core architectures. It struggles to keep costs under control, eliminate expensive last-minute changes, and squeeze the most out of tight budgets. Latest example: In a rush to get its 2013 Malibu to dealers, and before Barra moved into product development, GM equipped the new car with an older mild hybrid powertrain that has dampened sales.
At the top of Barra's to do-list is eliminating churn -- the changes, delays, and cancellations that she figures cost GM $1 billion a year between 2006 and 2009. Vehicle engineering projects get delayed, or stopped and restarted -- a ruinously expensive practice. Material and capital costs creep up and engineering workload fluctuates, creating inefficiency and rework. Technology innovations are made piecemeal, driving up costs. Delays mean that outgoing models stay on sale longer, leading to higher incentives and lower volumes.
Barra is attacking the interruptions by reducing complexity, instilling discipline, and improving overall efficiency. She tries hard to get decisions made early in the development process and then stick to them later on. Her mantra: "A great idea late is not necessarily great because it puts the customer at risk." She was surprised recently to discover that her closer associates were mostly to blame. "I was confident all the churn was coming from marketing," she told an employee group recently. "I would have bet a paycheck on it. So we did an audit and all the changes came from [engineering]. So we faced the ugly truth." Barra is candid about how much work lies ahead: "On a scale of one to ten, we're at a three."
While old GM viewed the world through the prejudices of its middle-aged Midwestern engineers, Barra looks at new models through the eyes of the customer. She scrutinizes touch points like steering wheels and gearshifts to understand exactly how the driver interacts with the vehicle. She recently discovered that the seat controls on the 2013 Buick Verano, a compact sedan, were crowded and hard to use; there was no room to unspool the seat belt and adjust the seat. After analyzing the problem, she discovered the fault lay with individual engineers who each sought the best location for their particular part and didn't coordinate their efforts. Wrong call, she told them: "We compromise on our component for the benefit of the customer."
Barra has been around GM all her life. She grew up in the Detroit suburbs, and her father was a die maker at Pontiac for 39 years. Her first car was a practical Chevy Chevette, bought after she impulsively put a deposit on a racier Firebird. When time came for college, she enrolled at the General Motors Institute (now Kettering University) in Flint as a co-op student (GM paid her annual tuition and, in exchange, she worked half of each year for the company). At 18, she found herself in a Pontiac plant, where she inspected poor-fitting hood and fender panels on the Grand Prix, and got her first hint of the problems that would drive GM into bankruptcy in 2009.
Following graduation in 1985 with a degree in electrical engineering (and after meeting Tony Barra, a consulting engineer whom she married that year; they now have two teen-age children), Barra went to work fulltime as a senior engineer in the Pontiac Fiero plant. She quickly came to the attention of plant manager Tim Lee, now GM's head of international operations and global manufacturing. "I knew early on that she would do well," says Lee. "She was determined, confident and passionate, and these traits continue to define her and drive her."
Quickly tabbed as a high-potential executive, Barra won a GM fellowship to attend Stanford Business School and graduated in the top 10% of her class. Out of school, she was made a manager of manufacturing planning and encountered another fast-rising young executive, Mark Reuss. Working together on the launch of what would be the last generation Cadillac De Ville, Reuss says Barra stood out in the highly politicized GM of the 1990s. Says he: "She knows how to do quality. She's no nonsense, plays no favorites, and has no cliques."
Barra's career got another boost in 1996 when she began a three-year stint as executive assistant to CEO Jack Smith and vice chairman Harry Pearce. Working for Smith, she got a front row seat as GM moved into China, where it now sells more cars than in North America. With their recommendation, she was sent to run internal communications, a corporate backwater that had turned critical following a nasty 50-day UAW strike. Barra hired, trained, and led a network of specialists to improve communications throughout the company, especially with union workers. In 2003, Barra went back to the factory floor as manager of the Detroit-Hamtramck assembly plant, which had a history of troubled automation. She managed to win quality awards, make the workplace safer, and successfully launch two new vehicles, the Cadillac DTS and Buick LeSabre.
Then-CEO Fritz Henderson plucked Barra from engineering in 2009 to make her head of Human Resources. The move seemed a head-scratcher, but GM had just declared bankruptcy, and Henderson was trying to bring some data-oriented efficiency to HR and reshape the culture at a very tumultuous time. As GM downsized and restructured, Barra immersed herself in the minutiae of compensation and benefits. She also got a seat on GM's executive committee, which brought her to Akerson's attention. Two years later, he moved Bob Lutz's successor out of product development and put Barra in.
When in Detroit, Barra's workday starts at 6 a.m. or 7 a.m. and runs a good 12 hours. She drives herself in a Cadillac ATS to one of her two offices -- a trip that takes nearly an hour since her family moved further west from Detroit in August. This year, she spent about one week a month in Germany trying to straighten out Opel. GM has had a tortured relationship with its European affiliate, arranging to sell it in 2009 and then reversing its decision -- largely at the urging of vice chairman Steve Girsky -- only to see sales collapse along with the European economy. Girsky is now Opel's chairman and Barra's likely competitor to succeed Akerson if he can turn Opel around, but Barra doesn't see any rivalry. "Opel is not a problem our team created, but it is ours to solve," she says.
That same could be said about everything Barra is trying to solve. "The stuff she is supposed to be doing were revealed as cost, quality and competitive issues in the late 1980s," says longtime GM watcher Maryann Keller. "It's now 25 years later, and Ford has figured it out and so has VW, but GM still needs an executive in charge of processes." What sets Barra apart from her predecessors is that having risen far higher than she ever expected, she has nothing to prove -- except to herself. "I'm an impatient person -- it gnaws at me." Her ability to convey that same sense of urgency to all 29,000 of her employees will determine the nature of the next stage in her remarkable career.
A shorter version of this story appeared in the December 24, 2012 issue of Fortune.